Entrepreneurship BCEN 2900
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Eleazar Williamson II
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This 14 page Class Notes was uploaded by Eleazar Williamson II on Wednesday September 23, 2015. The Class Notes belongs to BCEN 2900 at Middle Tennessee State University taught by Douglass Tatum in Fall. Since its upload, it has received 44 views. For similar materials see /class/213162/bcen-2900-middle-tennessee-state-university in Entrepreneurship at Middle Tennessee State University.
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Date Created: 09/23/15
Providing Highest Possible Quality Offering Better Service Maintaining Minimal Overhead Employing Maximum Use of Technology Targeting Missed or Poorly served Customers lSerIes 1 Offering More Choices and Selection Using Unique Marketing Approaches Offering Lower Prices Pg 161 Figure 61 The Franchising Relationship Element The Franchisor The Franchisee Site Selection Oversees and Approves may choose site Chooses the site with Franchisor s approval Design Provides Prototype Design Pays for and implements design Makes general Hires manages and res Employees recommendations and training employees suggestions Products and Services Determines product or service line Modi es only with franchisor s approval Prices Can only recommend Prices Sets Final Prices Establishes quality standards Must meet quality standards Purchasing Provides list of approved Must purchase only from suppliers May require approved suppliers Must franchisees to purchase from purchase from supplier if the franchisor required Develops and Coordinates Pays for National ad Advertising National ad campaign May campaign Complies with require minimum level of local advertising spending on local advertising requirements gets Franchisor approval on local ads Quality Control Sets quality standards and Maintains quality standards enforces them with trains employees to inspections Trains implement quality systems Franchisees Support Provides support through an Operates business on a day established business system today basis with Franchisor s support V V V V Chapter 6 Franchising and the Entrepreneur Piggy Backing A method of franchising in which two or more franchises team up to sell complementary products or services under one roof Conversion Franchising A franchising trend in which owners of independent business become franchisees to gain the advantage of name recognition 72 of Franchisors in North America use Conversion Franchising as a growth strategy The Franchisor gets immediate entry into new markets and experienced operators Franchisees get increased visibility and often a big sales boost The biggest force in Conversion Franchising has been Century 21 real estate co which converts independent real estate agencies into franchised units Sub Franchising master franchising Gives the Franchisee the right to create a semi independent organization in a particular territory to recruit sell and support other franchises Chapter 7 Buying an Existing Business Due Diligence Evaluating an Existing Business The process of investigating the details of a company that is for sale to determine the strengths weaknesses opportunities and threats facing it 1 Why does the owner want to sell 2 What is the physical condition of the business 3 What is the potential for the company s products or services 4 What legal aspects should be considered 5 Is the business financially sound Covenant not to Compete Cannot buy a business and then take it to start up more somewhere else Different Ways to Value a Business I Goodwill the difference in the value of an established business and one that has not yet built a solid reputation for itself I Balance Sheet Technigue a method of valuing a business based on the value of the company s Net Worth gt gt V I Adjusted Balance Sheet Technique A method of valuing a business BASED ON the MARKET VALUE of the company s net worth I Earnings Approach a method of valuing a business that recognizes that a buyer is purchasing the future income earnings potential of a business Variation 1 of Earnings Approach Excess Earnings Method Variation 2 of Earnings Approach Capitalized Earnings Approach Discounted Future Earnings Approach Variation 3 Market Approach a method of valuing a business that uses the priceearnings PE ratio of similar publicly held companies to determine value Chapter 8 Building a Marketing Plan Product Life Cycle describes the Stages of Development growth and decline in a product s life TQM Total Quality Management Philosophy of producing a high quality product or service and achieving quality in every aspect of the business and its relationship with the customer the focus is on continuous improvement in the quality delivered to customers Target Market The speci c group of customers at whom a company aims its goods or services Chapter 9 ECommerce gt SEO gt 10 Myths of E Commerce V V V munhyaNH l 8 9 Online customers are Easy To Please If I Launch a Site Customers Will Flock to It Making Money on the Web is Easy Privacy is NOT an Important Issue on the Web The Most Important Part of Any ECommerce Effort is Technology Strategy I Don t Need a Strategy to Sell on the Web Just Give Me a Web Site and the Rest Will Take Care of Itself On the Web Customer Service Is Not as important as It Is in a Traditional Retail Store Flashy Websites Are Better Than Simple Ones It s What s Up Front That Counts 10 It s Too Late to Get on the Web Web Analytics Tools that measure a Web site s ability to attract customers generate sales and keep customers coming back C0mpanies that use Web Analytics have an ADVANTAGE over those that don t Chapter 10 Pricing Strategies Fixed Costs Variable Costs Spring 2012 Entrepreneurship final exam Intellectual capital components copyrights or a patent Competitive advantage 4 p s product price promotion and placement Service they provide the way they sell How small businesses compete Two biggest factors Providing the highest possible quality Offering better service Balanced scorecard How the business is doing Chp 4 Prototyping best way to test product Barriers to entry start up capital competition anything keeping you from starting the business SWOT Strengths weaknesses opportunity and threats 5 c s of credit collateral capacity capital character conditions business environment swot Economies of scale the bigger the business is the more money it s gonna bring in Chp 5 Advantages of corporate entity limited liability and easy capital transfer of ownership C corp can have any number of share holders they pay individual tax and the corporation itself also pays tax S corp can only have 100 share holders but they are all only taxed individually LLC has like a board of directors that own the company and they are taxed individually Chp 6 Piggyback franchising taco bell and lcfc combined Conversion franchising small pizza company converts to pizza hut Sub franchising you can have multiple branches of your franchise Chp 7 buying an existing business Due diligence researching the business Covenant not compete The people that sell the business can t start a new business and compete with them Different ways to value a business buying an existing business There are different ways to evaluate a business but don t get too detailed into it Accounts revievable who owes the company money Lease agreements is the lease included in the sale and when does it expire Business records must be well kept Intangible assets Patents trademarks intellectual property Location and appearance Approaches to evaluating business Earnings approach method of valuing a business that recognizes that the buyer is purchasing the future income potential of the business Discounted future earnings approach what s its value in 5 years Market approach If you wanna open up a Mexican restaurant in town you see how much the one in the town next over is Chp 8 building a powerful marketing plan Branding put your mark TQMtotal quality management The philosophy of producing a high quality product and always producing the best service Product lifecycle Introductory Growth Maturity Decline Chp 9 Ecommerce lO myths of e commerce online customers are easy to please If I launch a site customers will ock to it Making money on the web is easy Privacy is not an important issue on the intemet Most important part of e commerce is technology false Still must have the same management as if your business is physical I don t need a strategy to sell stuff online Customer service isn t as important online Flashy websites are better than simple ones MJAENNI 9 99 9 It s what s upfront that counts False The systems in the background must be as good or better than the website 10 It s too late to get on the web False You can still get on the web and be successful 1 reason for abandoning shopping carts is shipping costs Web 20 social networking sites Web 20 tools Mashups multiple social networking sites in one website Wikis Wikipedia Chp 11 Current ratio current assetscurrent liabilities Determines the business ability to pay current liabilities out Gross pro t margin gross pro tnet sales revenue Chp 14 Trading area the region from which a business can expect to draw customers over a reasonable time span The radius of the customers that a business impacts Empowerment zone Like if Detroit or something if an area is economically failing you can get a tax break if you invest or run a business in that area Retail Compatibility Like putting your company in a mall Your business bene ts from the customer attraction that other business draw from Foreign Trade Zones A speci c zone in the US where you can operate a manufacturing plant for instance and import the materials you need without paying a tariff on it Business Incubator Like an office building that provides multiple companies with shared secretarial services fax machines vending etc Clusters Geographic locations that harbor certain industries Like Nashville for publishing companies Chp 15 Trade intermediaries Like a foreign distubutor They know the customs of a certain country better than you so you use them to distribute your product In charge of distribution Export management companies In charge of marketing merchant intermediaries that provide small businesses with a locost efficient off site international marketing department Ch 1 Entrepreneurship Test Review 1 gt Traits of an Entrepreneur Ch 2 gt Intellectual Capital Components A key source of a company s competitive advantage that is comprised of 1 Human Capital 7 talents creativity skills and abilities of a company s workforce shows up in the innovative strategies plans and processes that the people in an organization develop and then passionately pursue 2 Structural Capital 7 the accumulated knowledge and experience that a company possesses It can take many forms including processes software patents copyrights and perhaps most importantly the knowledge and experience of the people in a company 3 Customer Capital 7 includes the established customer base positive reputation ongoing relationships and goodwill a company builds up overtime with its customers n A r r S and Its C r Competitive Advantage is the aggregation of factors that sets a small business apart from its competitors and gives it a unique position in the market superior to its competition Four aspects to de ne a company s Competitive Advantage 1 Products they sel 7 What is unique about the products they sell Do they save customers time or money Are they more reliable or dependable than those that competitors sell 2 Service they provid 7 Many Entrepreneurs nd that the service they provide their customers is an excellent way to differentiate their companies Because they are small friendly and close to their customers small businesses are able to provide customer service 3 Pricing they offe 7 Some small businesses differentiate themselves using price Offering the lowest prices gives customers the incentive to buy Small companies that do not offer the lowest prices may be able to emphasize the value that their products offer V V V V V V 4 Way they sel 7 Companies that offer extended hours 24 help service website have the basis for an important competitive advantage Core Competencies and Its Components Core Competencies is a unique set of capabilities that a company develops in key operational areas that allow it to vault past competitors A company develops core competencies in no more than 5 or 6 areas These core competencies become the nucleus of a company s competitive advantage To be effective strategically these core competencies should be dif cult for competitors to duplicate Ch 4 Prototype An original functional model of a new product that entrepreneurs can put into the hands of potential customers so they can see it test it and use it You start a business with a prototype Barries to Entry Focus Groups 7 a market research technique that involves enlisting a small number of potential customers usually 8 12 to give an entrepreneur feedback on speci c issues about a product or service or the business idea itself Demographic Data Capital Requirements Typically service businesses require less capital to launch than do manufacturing or retail business Startup companies often need capital to purchase equipment buildings technology and other tangible assets as well to hire and train employees A good Feasibility Analysis provides an estimate of the amount of startup capital an entrepreneur will need to get the business up and running Cost of Capital Debt vs Equity gt 5 C s of Credit 1 Capital A small business must have a stable capital base before any lender is willing to grant a loan Most banks refuse to make loans that are capital investments because the potential loss would probably exceed the reward Lenders and investors see capital as a risk sharing strategy with entrepreneurs 2 Capacity Synonym easy ow More small businesses fail due to lack of cash than from lack of pro t It is possible for a company to be showing a pro t and still have no cash Lenders expect small businesses to pass the test of Liquidity Potential Lenders and Investors examine closely a small company s cash ow position to decide whether it has the capacity necessary to survive until it can sustain itself 3 Collateral Includes any assets an entrepreneur pledges to a lender as security for repayment of a loan If a company defaults on a loan the lender has the right to sell the collateral and use the proceeds to satisfy the loan 4 Character Lenders and investors must be satisfied with a business s character before extending a loan or making an investment The evaluation of character is based on intangible factors such as honesty integrity competence etc The Character of a company plays a major role in the decision to put money into a business 5 Conditions One important condition in uencing the banker s decision is the shape of the overall economy including interest rate levels in ation rate and demand for money Sole Proprietorship The simplest and most popular form of ownership It is a business owned and managed by one individual Makes up 71 of all businesses in the US Advantages 0 Most attractive feature how fast amp easy it is to begin o In order to start a business under your own name LaFave s Bakery all you need is to obtain the necessary licenses from state county andor local governments and begin operation 0 It IS POSSIBLE to start a proprietorship IN ONE DAY 0 Least costly form of ownership to establish 0 To get started all you do is go to the city or county government and purchase a business license 0 In this ownership the OWNER IS THE BUSINESS 0 When the owner pays all of their company s expenses they can keep the remaining pro ts meaning LESS TAXES 0 Because the owner of a proprietorship is selfemployed they are subject to the selfemployment tax which currently stands at 153 of the proprietor s income 0 In total control of all decisions made for the business 0 LEAST REGULATED 0 Easy to Discontinue Disadvantages 0 Unlimited Personal Liability 7 business owner is personally liable for all the business debt 0 Limited Skills and Capabilities o Feelings of Isolation 0 Limited Access to Capital 7 in order to expand a business a sole proprietor often needs additional nancial resources but many of them have already put all they have into their businesses and have used their personal resources as collateral to acquire loans making it dif cult for additional funds 0 Lack of Continuity of the Busines 7 If the owner dies retires or become incapacitated then the business automatically terminates unless a family member or employee can take over C Corp Creations of the State When a corp is founded it accepts the regulations and restrictions of the state A Corp must report annually its nancial operations to its home state secretary of state How to incorporate Most states allow entrepreneurs to incorporate without the assistance of an attorney Some states provide incorporation kits to help the staiting process Once an entrepreneur decides to form a corporation they must choose a state in which to incorporate States differ sometimes dramatically in the requirements they place on the corporations they charter and how they treat the corporations created Taxes also differ depending on the state To create a corporation every state requires a Certi cate of Incorporation or charter to be led with the secretary of state Advantages of a Corporation Limited Liabili of Stockholder 7 a corporation allows investors to limit their liability to the total amount of their investment in the business The Corporate form of ownership does NOT protect its owners from being held personally liable for fraudulent or illegal acts Ability to attract Capital 7 most effective in accumulating large capital Ability to Continue Indefiniter 7 they can continue indefinitely unless they don t pay their taxes Transferable Ownership 7 If a stockholder wants to liquidate their shares of ownership they can sell their shares Disadvantages of a Corporation Cost and Time Involved in the Incorporation Process Double Taxation The distinct disadvantage of the corp ownership Because a corporation is a separate legal entity it must pay taxes on its net income at the federal level in most states and to some local governments as well Must pay these taxes at the corporate taX rate Stockholders must pay taxes on the dividends they receive from these same profits at their individual taX rates Potential for Diminished Managerial Incentive Legal Requirements and Regulatory Red Tape 0 Corps are subject to more legal reporting and financial requirements than other forms of ownership 0 Must hold annual meetings Potential Loss of Control by the Founders gt S Corporation In 1954 the Internal Revenue Service Code was created An SCorporation is only a distinction that is made for federal income taX purposes and is no different from any other corporation S Criteria 0 Must be a domestic corporation
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